5 ways to invest in Lagos real estate market with under N5m

Investing in the Lagos property market can be expensive due to several factors. Excessive demand and supply deficit, high land prices, and the surging cost of other construction inputs make it extremely capital-intensive to buy real estate in Lagos. 

Lagos is Nigeria’s most populated city, with over 20 million people. The demand for housing in the city is high, but the supply of available and affordable land and properties is limited. This imbalance drives up property prices. Additionally, more than any other city in Nigeria, Lagos is experiencing rapid urbanization, with more and more people moving to the city from rural areas in search of better job opportunities and a higher standard of living. This influx of people further increases the demand for housing, putting upward pressure on prices. 

As expected in every growing third-world city, Lagos’ infrastructure is not keeping pace with its population growth. This includes good road network, effective and affordable transportation, and power supply. These constraints make it more expensive to develop new properties and maintain existing ones, contributing to the higher property prices in Lagos. Further deepening the constraints,  land speculation (where investors buy land with the expectation of its value increasing in the future) is a common practice in Lagos. This speculative activity artificially inflates land prices, making it more expensive for developers and individuals to acquire land for property development purposes. 

Lagos’ economic attractiveness is also contributing to the high price of properties in the city. Over the past 5 decades, Lagos has remained Nigeria’s most important economic hub, attracting businesses and high-net-worth individuals from across the world. This concentration of wealth contributes to the high demand for properties and drives up prices in prime and even suburban locations across the city. The cost of construction materials, labour, and professional services in Lagos is relatively higher and contributes to the high cost of properties within Lagos.  

The cost of entry into the Lagos real estate market makes it difficult for most people to invest in the city’s property market. Property prices in Lagos are generally expensive, making it almost impossible for the average Nigerian to participate. In this article, we will be discussing alternative ways that people can invest in Lagos with under 5 million naira. 


AirBnB and Shortlet Rental 

Investing in Airbnb properties typically requires a smaller down payment compared to traditional rental properties. This is because Airbnb properties often generate higher rental income, which in other parts of the world, allows investors to cover their mortgage payments with a lower down payment. With less than 5 million naira, one can rent an apartment in Lagos and put it up for shortlet to earn rental income. Typical occupancy for AirBnB and Shortlets can range from 40% to up to 80% depending on location and quality of amenities/service. Another advantage of shortlets is that investors can retain the flexibility to use their Airbnb properties for personal use or vacations when not occupied by guests. This allows them to enjoy their investment while generating income. Airbnb hosts may be eligible for certain tax deductions related to property rental expenses, such as mortgage interest, depreciation, and operating costs.  

Airbnb properties also typically require less hands-on management compared to traditional rentals. Hosts can utilize property management services or manage the property themselves, handling guest communication, cleaning, and maintenance. Short-term rentals can generate quicker returns on investment compared to traditional rentals. This is due to the higher nightly rates and the ability to turnover multiple guests in a short period. Airbnb platforms help investors to adapt faster to the market by providing valuable data and analytics, allowing hosts to optimize their pricing, amenities, and guest experience based on market trends and guest feedback. 



Crowdfunding and Co-Investing options  

Crowdfunding and co-investing options have emerged as innovative real estate investment strategies that significantly lower the cost of entry for investors. These strategies enable individuals to pool their capital and invest in real estate projects that otherwise would have been inaccessible due to the high upfront costs associated with traditional real estate investments. Crowdfunding platforms and co-investing opportunities often require lower minimum investment amounts compared to traditional real estate investments. This allows individuals with smaller amounts of capital to participate in real estate projects, democratizing access to this asset class. 

Crowdfunding and co-investing enable investors to purchase fractional ownership stakes in real estate projects. This means that instead of purchasing an entire property, individuals can invest in a portion of a project, further reducing the upfront capital requirement. Crowdfunding and co-investing platforms offer a variety of real estate projects to choose from, allowing investors to diversify their portfolios across different property types, locations, and investment structures. This diversification helps mitigate risks and spread potential returns. Crowdfunding platforms and co-investing structures often involve experienced real estate professionals who manage project development, property operations, and tenant relations. This allows investors to benefit from professional expertise without the hassle of direct property management. 

Acquire land in nascent locations  

Acquiring land in nascent locations as a real estate investment strategy can help reduce the cost of entry for investors in several ways. One of the most profound is that land in nascent locations, often referred to as “up-and-coming” or “emerging” areas, typically carries lower land prices compared to more established areas. This is due to factors such as lower demand, less development, and limited infrastructure. Nascent locations often have the potential for significant appreciation in land value over time.  

As the area develops and infrastructure improves, demand for land and property increases, driving up prices. Investors who acquire land early can benefit from this long-term appreciation. Acquiring land in nascent locations provides investors with flexibility for future development opportunities. As the area grows, investors can choose to develop the land themselves, sell it for a profit, or lease it to generate rental income. Land typically carries lower carrying costs compared to developed properties. Investors don’t have to worry about property taxes, maintenance expenses, or tenant issues. This allows them to conserve capital and focus on long-term appreciation. 

Invest in long leases and sub-lease 

Investing in long leases and sub-leasing as a real estate investment strategy can help reduce the cost of entry for investors in several ways. Compared to purchasing a property outright, investing in long leases and sub-leasing requires a smaller upfront investment. Investors only need to cover the cost of acquiring the lease, which is typically a fraction of the property’s value. As a lessee, investors are not responsible for the day-to-day management of the property, such as maintenance, repairs, and tenant relations. This reduces the burden of managing a property and allows investors to focus on finding sub-tenants and managing the rental income stream. 

Sub-leasing can potentially generate higher rental income compared to traditional long-term rentals. This is because sub-leases often target short-term tenants, such as vacationers or business travelers, who may be willing to pay higher rates for shorter stays. 




Investing in real estate investment trusts (REITs) offers several advantages that make them an attractive option for investors seeking to reduce the cost of entry into real estate investing. Here’s how REITs can help lower the barrier to entry: 

REITs allow investors to own a fractional share of a diversified portfolio of income-producing real estate, rather than having to purchase an entire property outright. This significantly reduces the upfront capital required to invest in real estate, making it accessible to a wider range of investors. REITs are typically traded on major stock exchanges, allowing investors to buy and sell shares with lower transaction costs compared to purchasing and selling physical properties. This reduces the overall cost of entry and exit from real estate investments. 

REITs are managed by experienced professionals who handle the day-to-day operations of the underlying properties, including property selection, leasing, maintenance, and tenant relations. This relieves individual investors from the burden of managing properties themselves. REITs typically invest in a diversified portfolio of real estate assets across different property types, geographic locations, and industries. This diversification helps mitigate risk and reduce exposure to market fluctuations in specific regions or sectors. REITs provide access to specialized real estate markets, such as healthcare properties, retail spaces, or industrial facilities, which may be difficult or expensive for individual investors to access directly. 

REITs are traded on exchanges, providing investors with liquidity and the ability to easily buy and sell their shares. REITs are also subject to SEC reporting requirements, ensuring transparency and access to financial information. REITs are required to distribute at least 90% of their taxable income to shareholders as dividends. This provides investors with a regular stream of income, potentially enhancing the overall return on their investment. Real estate has historically offered long-term appreciation potential, and REITs provide investors with exposure to this asset class. While REITs may experience short-term fluctuations in value, they have the potential to generate attractive returns over the long term. 


If you want to gain more insight on how to invest in real estate in Nigeria, you can reach out to our research team by emailing research@buyletlive.com. 

If we missed something, please let us know by emailing research@buyletlive.com. We welcome your feedback. You can also click here to read similar articles on our website. 

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